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Apr, 06 2012

A CLASS APART IN FRANCHISING

As a classroom is to learning, today's education is to earning. Our ‘Education Special’ comes with a baggage full of lessons to be learnt by the franchise community. According to a survey by TFW, vocational training emerges as the most preferred segment i

IN the last few years, the education industry has grown to become one of the largest in the services market. The reason for its robust growth is the franchise sector that has marked the entry of many private players. With 32 per cent of total franchise activity contributed by education and training in India, The Franchising World carried out a survey to get an insight into the perception of the potential franchisees on the most desirable segment in the education sector and various other aspects of this sector. The study will enable the franchisors to gauge the viewpoints of the potential franchisees and work harder for more success.

How the study was conducted?

To elicit responses of potential franchisees interested to take up a franchise in the education and training sector, a survey was carried out among prospective franchisees from across India. These respondents were further divided into three age groups of 21-35, 36-50 and 51-65 years, as age is deemed to be a critical variable for the purpose of the study. A questionnaire was circulated among them to find out their perception of the best area that can be opted for in the education sector, and various other aspects pertaining to this sector.

Education sector: an overview

One of the largest industries in the services market, the education industry, is largely fragmented but promises high growth rate with even higher returns. The education sector has opened its doorway to franchising and several other private players.

About the huge potential of this sector, Shantanu Prakash, CMD, Educomp Solutions Ltd, said: “India's education sector is currently estimated to be a $ 40 billion market with a potential 16 per cent five-year CAGR. As Indians continue to climb the economic ladder, spending on education is expected to grow by 11 per cent over the next 20 years. If India's GDP has to grow at 8 per cent plus, it needs far greater entrepreneurial fuel than is available now. Education is the only ballast that can help the country to achieve those figures.”

Choice of education segments

The study found that vocational training was a popular choice of the respondents between the age groups of 21-35 years and 36-50 years. It's one of the fastest growing segments in the education sector, as private equity players are showing keen interest in it and many partnerships between corporates and institutes are being forged in this segment.

Amitabh Lahiri, Chief Business Officer, Career Building Solutions, NIIT Ltd, says: “According to a McKinsey-NASSCOM study, the IT/ITeS industry is projected to grow to $225 billion by 2020, employing 10 million directly and 20 million people indirectly. With India poised to benefit the most from this scenario due to the demographic dividend of young, surplus manpower, the need for trained professionals is paramount.”

He adds: “Also, the employability of college graduates is low, with major gaps in soft skills and technical skills. An investment in IT/ITeS training, therefore, pays rich dividends, as the training industry is poised for a boom, thus being the right opportunity for entrepreneurs to invest in innovative business models.”

Most of the respondents in the age group of 36-50 years opted for preschools. Though an urban-driven phenomenon, it is rapidly proliferating beyond the metros and tier-I cities with the help of organised preschool chains. It is expected to expand three times in size in 2012.

The respondents between 51 and 65 years chose coaching classes as one of the best options in the education sector. Coaching classes are a highly urban phenomenon and have a niche market. While coaching classes compete with one another in the market, the competition is more intense among those that provide coaching for professional courses. It is pertinent to note that the non-formal education sector is growing at the rate of 18 per cent, and $13 billion is spent annually by Indians on higher education.

K-12 as a franchise segment to invest in was only opted for by a few respondents in the age group of 21-35 years. Increasing demand for quality education is the major force that has attracted international partnerships in the K-12 segment. This segment has switched over to digital content from traditional blackboards to enhance quality of teaching. Many pre-school chains like Euro Kidz, Kidzee, etc., are moving up the value chain to K-12. According to a report by Ernst & Young, the higher education sector in India is expected to witness a growth of 18.0 per cent CAGR till 2020. It is estimated to grow at an average rate of more than 18.0 per cent to reach over Rs 2, 32,500 crore in 10 years.

“Today, we have a presence across the education spectrum - from pre-schools to K-12 to higher and vocational education; brick and mortar to online to VSAT model; across India to growing overseas presence. It is a well-recognized fact that India is all set to become the largest education market in the world in the next decade,” says Shantanu Prakash, CMD, Educomp Solutions Ltd.

Franchising considerations

Franchise fee, break-even and return on investment (RoI) are the first thoughts that cross the minds of most of the franchisees before entering the education sector. Respondents in the age group of 21-35 years consider investment as the parameter for deciding whether to enter the education sector, while RoI rules the minds of the respondents in the age group of 51-65 years.

There were contrasting ideologies of the respondents when it came to investment. Rs 5-10 lakh was opted for by most of the respondents in the age group of 21-35 years; Rs 2-5 lakh was decided on by those in the age group of 36-50 years, and a majority of the respondents between 51 and 65 years preferred a meager investment of Rs 50,000-2 lakh.

Most of the potential franchisees wanted advertising and promotional costs, and set-up costs to be included in the franchise fee, and wanted that the franchisor should provide them trained staff.

Training and support have been highlighted as a franchisee's fundamental requirements in any education segment. Training is essential as it provides guidelines for all spheres--- from school-designing, recruitment of teachers to marketing and advertising.

When their views were sought, most of the existing franchisees in the education sector expressed their satisfaction with the training, technical support and advertising and promotional material provided by their franchisors. Gaurav Methwani, franchisee of Calorx pre-schools, says: “My overall experience in the franchising industry has been extremely satisfactory, and the best part of my franchisor is that quarterly meetings of franchisees are held regularly. Such meetings help in recognising the growth of other franchisees and problems each of them is facing. It also helps in planning the further growth, curriculum and execution of ideas. Over all improvisation can be implemented by such meetings.”

The franchise education industry is poised for growth and it's time for the potential franchisees to tap the great potential this industry possesses. Therefore, franchising seems to be the way ahead in achieving a double-digit growth in this profitable segment. So, pack your bags and explore the potential of the franchise education industry.

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